OPINION: SA agriculture’s value beyond contribution to GDP
By Thulasizwe Mkhabela
JOHANNESBURG - Agriculture is an important sector of the South African economy despite its meagre contribution to the gross domestic product (GDP) in strict terms.
The sector contributes 4 percent annually to the GDP in South Africa and this figure appears miniscule at face value.
However, in the bigger scheme of things, this strict measurement of the sector’s contribution to the South African economy does not do justice to real contribution of agriculture.
The recent economic figures released by Statistics South Africa (StatsSA) show that agriculture was the only sector that posted a positive growth figure in the last quarter of 2020 as a sequel to its stellar performance in the previous quarter (quarter one).
Agriculture continues to be the redeeming feature of the South African economy even in trying times of economic contraction and the Covid-19 pandemic.
Agriculture’s contribution the South African economic wellbeing should not be discounted simply because of the sector’s percentile contribution to GDP.
Agriculture has both backward and forward linkages to the entire economy and these contributions are attributed to other sectors of the economy. The sectors that benefit most from this accounting practice are manufacturing, food, beverages, and services.
Agro-processing activities are often attributed to the manufacturing sector while the food and beverages largely depends on the agricultural sector for throughput.
Backward production linkages refer to linkages from the farm to the part of the non-farm sector that provides inputs for agricultural production, for example, agrochemicals. Forward production linkages refer to the part of the non-farm sector that uses agricultural output as an input.
Given the foregoing definition, it stands to reason that agriculture is not given the recognition due to it in terms of its contribution to the Gross Domestic Product. The contribution of agriculture to the economy is further enhanced by linking farmers to markets. More and more smallholder farmers are being linked to formal markets, sometimes referred to as commercialisation pathways, in South Africa and beyond.
The linkage of farmers of markets in South Africa often involves the private sector through agribusinesses – also referred to in literature as a lead firm.
The importance of the mutually beneficial relationship between smallholder, or any other farmer, and the lead firm cannot be over-emphasised and should be encouraged by all and sundry.
Agriculture acts as both a market for others sectors in the economy through backward linkages and also as a provider for raw materials to others through forward linkages.
Furthermore, agriculture contributes substantially to employment creation in South Africa. In fact, agriculture’s contribution to overall employment is disproportionately higher that what the sector is credited for in terms of its mere contribution to the GDP.
The foregoing assertions make a strong case for continued support to the agricultural sector because of the returns to investments that such support accrues. By providing support to the agriculture, policy makers are inadvertently supporting the other economic sectors that feed off agriculture.
Thus, supporting agriculture and ensuring that the sector continues to thrive, is a prudent macroeconomic policy intervention that should be deliberately pursued in South Africa and Africa at large.
The South African agriculture sector has proved itself as a lucrative sector to invest in order to support economic growth and achieve other government and national imperatives such as job creation, alleviating poverty and addressing inequality, hence the success of the land reform programme is paramount to achieving a more egalitarian society in South Africa.
Given a conducive environment within which to operate, the South African agriculture sector is poised to prosper and continue to contribute meaningfully to the country’s economic growth and ensuring food and nutrition security.
The agriculture sector should never be regarded as less important or inferior to other economic sectors merely because of its apparently insignificant contribution as measured through sectoral contribution to the GDP.
Dr Thulasizwe Mkhabela is an agricultural economist and is currently the group executive: Impact & Partnerships at the Agricultural Research Council; [email protected]